The Banking Executive Issue - October 2025 Issue

2025 IMF–World Bank Meetings Behind the communiqués, a more subtle conversation unfolded about who sets the rules of the global finan- cial system. Emerging markets—including Arab and BRICS countries—pressed for faster progress on IMF quota reform and World Bank governance changes. The UAE highlighted a broader vision for rebalancing quotas and supported the UN framework on international tax cooperation, signal- ing a desire to be at the table as tax, trade and financial rules evolve. Arab Governors and ministers echoed a common refrain: multilat- eral institutions must move from pri- marily crisis-response roles to becoming platforms for long-term structural transformation—support- ing diversification, human capital, digital infrastructure and climate re- silience. They also stressed that re- construction in Gaza, Syria and other fragile settings cannot wait for perfect political conditions; financing tools and safeguards must be ready in ad- vance. The IMF, for its part, highlighted on- going reviews of surveillance and conditionality to better reflect struc- tural and distributional realities, while the World Bank showcased its internal reforms as proof that Multi- lateral Development Banks (MDBs) can move faster, simplify processes and mobilize more private capital without sacrificing prudence. ISSUE 202 OCTOBER 2025 the BANKING EXECUTIVE 53 7. POLITICAL ECONOMY, GOVERNANCE & MULTILATERAL REFORM KEY RISKS & OPPORTUNITIES FOR THE GLOBAL ECONOMY The 2025 Washington meetings leave the global economy at a cross- roads. Risks include: • A sharper-than-expected slow- down as AI investment normalizes and the boost from front-loaded trade fades; • Debt-related stress in highly lever- aged sovereigns, with potential spillovers through banks and NBFIs; • Further trade and technology frag- mentation, particularly if tariff dis- putes broaden; • Climate shocks and conflict flare- ups, especially in already fragile regions. Opportunities include: • AI-driven productivity gains, par- ticularly for countries that invest early in skills, digital infrastructure and governance; • Rewired trade and energy routes that could benefit strategically po- sitioned economies, including in the Gulf and Eastern Mediter- ranean; • A retooled multilateral system ca- pable of mobilizing larger volumes of blended finance for climate, dig- ital and human-capital invest- ments. STRATEGIC PRIORITIES FOR BANKS, REGULATORS & ARAB POLICYMAKERS For Arab banks and regulators, sev- eral strategic priorities stand out: Re-price sovereign and credit risk. Integrate the IMF’s debt and finan- cial-stability messages into internal risk appetites and pricing models, with particular scrutiny of long-tenor exposures in high-debt jurisdictions. Invest in AI and DPI capabilities. Take advantage of the region’s rela- tively strong AI preparedness by modernizing core systems, upgrad- ing data governance and building AI- literate risk and compliance teams—while engaging proactively with regulators on standards. Scale sustainable and transition finance. Develop products—green and tran- sition sukuk, sustainability-linked loans, blended structures with MDBs—that finance both mitigation and adaptation, including in high- risk segments such as agriculture, water and urban resilience. Deepen regional integration. Support cross-border payment sys- tems, harmonized regulatory stan- dards and joint financing platforms with Arab regional institutions, lever- aging the momentum from the Arab Governors’ initiatives. MONETARY POLICY, REGULATION, CAPITAL FLOWS & INVESTMENT PATTERNS The modest but steady growth out- look, combined with easing inflation, points to a gradual, asynchronous easing cycle globally. For MENA central banks, especially those with currency pegs, this will mean care- fully mirroring—or slightly lagging— moves by the Federal Reserve and ECB, while maintaining vigilant com- munication to anchor expectations. Regulators are likely to: • Push for enhanced disclosures on climate and sovereign risk; • Expand macro prudential frame- works to capture NBFIs and hous- ing exposures; 8. WHAT COMES NEXT